In today’s briefing:
- Exploring the Kakao Corp and Krafton Deal Potential for Kakao Games
- Honda (7267) : Offering’s Underwhelming Global Index Implications
- Rex Minerals (RXM AU): Salim Group’s Binding Offer at A$0.47
- Quiddity Leaderboard for Hang Seng Index Sep 24: New Economy? Clean Energy? or Shipping?
- LQ45 Index Rebalance Preview (July): Identifying Potential Index Changes
- Tender Offer and Taking Private of Shinsung Tongsang
- KOSPI200 Index Rebalance Preview: 4 Changes Likely in December
- Asia Cement China (743.HK) – Investors Are Facing the Dilemma of Low-Priced Privatization
- (Desperate) Takeover Bid in the Making
- StubWorld: Hanwha Corp’s Steep Discount & Tender Offer
Exploring the Kakao Corp and Krafton Deal Potential for Kakao Games
- Kakao has begun talks with potential buyers for Kakao Games, with Krafton leading discussions directly using its own investment team.
- Despite official denials, it’s viewed as procedural. Local markets anticipate the deal due to no direct refutation beyond formal announcements.
- A three-month compliance period from disclosure makes this quarter challenging, but completion announcement potential exists by Q4 this year.
Honda (7267) : Offering’s Underwhelming Global Index Implications
- Despite the significant offering size, passive fund demand is unlikely to materialize due to non-strategic selling shareholders.
- Company’s number of shares and free float in the main global indices are forecasted to remain the same before and after the offering.
- Upcoming buybacks can lead to a decrease in float shares which can even cause passive fund supply at a subsequent quarterly review.
Rex Minerals (RXM AU): Salim Group’s Binding Offer at A$0.47
- Rex Minerals (RXM AU) has entered a scheme implementation deed with MACH Metals Australia at A$0.47 per share, a 70.9% premium to the undisturbed price (5 July).
- The key conditions are shareholder and FIRB approvals. FIRB approval should be forthcoming as Salim is the largest shareholder and the cordial Indonesia-Australia relations.
- While the offer represents a 10-year high, it implies multiples, which are light compared to precedent transactions. Nevertheless, this is a done deal. At last close, the spread was 9.3%.
Quiddity Leaderboard for Hang Seng Index Sep 24: New Economy? Clean Energy? or Shipping?
- In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in September 2024.
- The index changes for the September 2024 index rebal will be announced on 16th August 2024.
- The HSI selection process is highly subjective and does not follow clear-cut rules. This insight is simply an attempt to provide readers with an overall understanding of the possible scenarios.
LQ45 Index Rebalance Preview (July): Identifying Potential Index Changes
- The review period for the LQ45 Index July rebalance ended 30 June. The changes should be announced the last week of July, becoming effective after the close on 31 July.
- Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
- For a change, the impact on the potential inclusions will be higher since they will join the index with higher weights compared to the potential deletions.
Tender Offer and Taking Private of Shinsung Tongsang
- On 21 June 2024, Canaan Co. announced a tender offer and taking private of Shinsung Tongsang. Tender offered shares are 31.664 million shares, representing 22.02% of outstanding shares.
- It could be difficult to complete this tender offer at 2,300 won, because there could be many investors that simply refuse to sell their shares at such low valuations.
- On the business side, the company has successfully captured higher market share and enjoyed higher profit margins especially for the Top Ten apparel brand, taking away market share from Uniqlo.
KOSPI200 Index Rebalance Preview: 4 Changes Likely in December
- Around a third of the way though the review period, there could be 4 changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
- The impact on the potential inclusions ranges from 0.6-21 days of ADV while the impact on the potential deletions varies from 2.5-16 days of ADV.
- The potential adds have outperformed the potential deletions over the last few months and there could be more to go with short selling banned.
Asia Cement China (743.HK) – Investors Are Facing the Dilemma of Low-Priced Privatization
- Many minority shareholders have lodged complaints against ACC with the SFC, since unfair privatization price damages the ecology of the entire market.It depends on whether the SFC will take action.
- The failure of privatization does not necessarily mean better returns for investors. On the contrary, it may result in greater losses. ACC can have other ways “hollow out” the Company.
- Arbitrageurs can choose to bet on a second privatization (with higher Offer Price) and also on the potential dividends, but the prerequisite is that the management choose to “act honorably”.
(Desperate) Takeover Bid in the Making
- Grifols’ founding families and Brookfield ask the Board for the necessary information to evaluate an offer for 100% of Grifols SA (GRF SM). The CNMV has halted trading in the shares.
- Grifols is worth €5.5 billion, after plummeting 39% in 2024. The deal smacks of desperation from the founding families, worried not to lose control of the company to debt holders.
- There should be a minimum premium to guarantee offer success, at least 15% to current share price (maybe even 30%). B shares are protected in case of takeover.
StubWorld: Hanwha Corp’s Steep Discount & Tender Offer
- With Hanwha Corporation (000880 KS) trading around a one-year low NAV discount, the Hanwha Group has made a Tender Offer for 8% of shares outstanding at ₩30,000/share.
- Preceding my comments on Hanwha are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
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